Question

Amal received a Form 1099-DIV with a capital gain distribution of $305. Amal also received a Form 1099-B from the sale of 240 shares of AMS stock purchased for $4,800 plus a $47 commission fee on February 22, 2020. The net proceeds of the stock sale were $4,220 (the commission fee was $33 ) and the trade date was February 22, 2021. What are the amount and nature of Amal's gain (loss) on these transactions?

a.$594 short-term loss and $305 long-term gain
b.$594 long-term loss and $305 short-term gain
c.$627 long-term loss and $305 short-term gain
d.$627 short-term loss and $305 long-term gain

Answer 1

Amal has a short-term loss of $627 from the sale of AMS stock and a long-term gain of $305 from a capital gain distribution on Form 1099-DIV. The stock sale resulted in a loss because the sale proceeds were less than the cost basis, and the capital gain distribution is considered long-term. Hence, the correct answer is option (d).

Step-by-step explanation:

To calculate Amal's gain or loss on the sale of AMS stock, we need to consider the cost basis and the sale proceeds. The cost basis includes the purchase price plus the commission fee on the purchase.

Therefore, the total cost basis is $4,800 purchase price plus $47 commission fee, which equals $4,847.

Subtracting the net proceeds from the sale, which were $4,220, we find that Amal has a loss on the stock sale.

The loss amounts to $4,847 (cost basis) minus $4,220 (net proceeds), which gives us a short-term loss of $627 since the stock was held for less than a year (from February 22, 2020, to February 22, 2021).

Additionally, Amal received a capital gain distribution of $305, which is typically considered a long-term gain, regardless of how long the individual held the fund shares.

Therefore, the correct answer to the question is: Amal has a $627 short-term loss and a $305 long-term gain.